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There are $ 1 8 0 , 0 0 0 loan at 9 % for 2 0 years and a second mortgage for $ 4

There are $

180, 000

loan at

9 %

for

20

years and a second mortgage for $

40, 000

13 %

for

10

years. All loans require monthly payments and are fully amortizing.

5

points are charged for the second mortgage. Assume the borrower will own the property for

30

years. Compute the effective cost

(%)

of the combined loans.

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